Mennonite Health Journal

Articles on the intersection of faith and health








Challenges of a Changing Health Care System

Timothy Stoltzfus Jost

from Mennonite Health Journal, Vol. 15, No. 3 – August 2013

The American health care system is undergoing revolutionary changes.  These changes present major challenges to health care providers and consumers.  These challenges take many forms-economic challenges, capacity challenges, challenges to authority, and challenges to doing things the way we have always done them.  But we also face moral challenges—moral challenges presented by the changes our health care system is undergoing and moral challenges that are motivating these changes.

This article begins by discussing our current health care system.  Second, it will examine the changes currently taking place.  In particular, it will focus on the Affordable Care Act and the changes it is driving.  Third, it will address the challenges those changes are presenting to us, and in particular the moral challenges.

Our Changing Health Care System

As we look at our current health care system, three characteristics stand out.  First, access to health care in the United States has been determined primarily by insurance.  Private insurance, our predominant form of coverage for working age Americans, has been employment-based and risk-based.  Public insurance has only been available to those who have a good reason for not being in the job market and who are, by and large, not insurable—the old, the disabled, dependent children. Insurance often also excludes coverage for pre-existing conditions, which are often the primary reason that people seeking insurance need it. We are moving toward a system in which health insurance will be available to most Americans regardless of health status, employment status, and wealth.  Some, such as undocumented aliens, will still be excluded, but far more will be included than before.

Second, our system has been doctor and hospital centered, and focused on the treatment of acute illnesses and accidents.  Since the nineteenth century, the scope of practice of all other health care professionals has been defined more narrowly than that of the physician and in many instances has been defined in relationship to that of the doctor.  Doctors and hospitals in the United States have also focused on the care of individuals rather than populations and on acute conditions rather than on community and clinical prevention or on maintenance care for chronic conditions.  We are moving to a system that will at least be somewhat more patient-centered, possibly more population-centered, and that will focus more on prevention and on maintenance care for chronic conditions.  It will be more integrated and coordinated, and less dependent on doctors and hospitals.

Third, our system has been characterized by fee-for-service payment. We are moving to a system of more global payment, and hopefully payment based more on value and outcome.   We are also, however, moving toward a system where patients will continue to bear more of the immediate cost of their care.

The health care system built on these fundamentals has functioned tolerably well for most Americans.  For the last fifty years, most Americans have been able to access medical care when they have had serious accidents or diseases.  Diseases that killed alarmingly high numbers of children in previous generations have been prevented by vaccinations or cured by antibiotics.  Life expectancy grew by over 60 percent over the twentieth century.  Insurance has shielded most Americans from devastating financial ruin in the face of medical problems, even when they have been faced with serous illnesses or accidents.

But as we all know, our system has had glaring deficiencies, and has not worked for everyone.   During 2012, 55 million working age adults, 30 percent, were uninsured at some point.  Since insurance is normally based on employment, a loss of employment, however temporary, has usually meant loss of insurance.  Thirty million working age adults are also underinsured.  Even though they have insurance, it has serious gaps exposing them to financial disaster if they are seriously ill or injured.  Although one function of health insurance is to secure access to care, another very important function is to protect us from financial ruin, and to secure the payment of providers who have provided us services.

This does not mean that these Americans necessarily die in the streets for lack of medical care, although some have.  The Emergency Medical Treatment and Active Labor Act (EMTALA) requires hospitals that participate in Medicare and that have emergency departments to screen and stabilize people who present in an emergency regardless of ability to pay.  But, as we all know, emergency rooms are a very inefficient way to provide basic health care.  And EMTALA does not require hospitals, much less the doctors who practice within them, to provide care for free.  Many uninsured people avoid emergency rooms because they do not want to assume the debt that they will incur if they use their services.  And hospitals face huge uncompensated care burdens that they try, not always successfully, to transfer to other payers.

America also has by far the most expensive health care system in the world.  Our health care delivery system costs $8680 for every man, woman, and child in the U.S.  It consumes almost 18 percent of our GDP.   We spend more on healthcare than we spend on housing, on food, on transportation, on anything else.  What is even more striking is the opportunity cost of our healthcare system, the opportunities we lose because of our excess health care spending.  Over the past 30 years, from 1980 to 2010, the gap between the per capita spending of the U.S. on health care and that of Switzerland, the second most expensive country, has been 15.5 trillion dollars.  With $15.5 trillion, we could have:

  • Turned the U.S. $11.6 trillion federal debt into a $3.9 trillion surplus,
  • Sent 175.4 million students through a 4 year college,
  • Cover an area the size of South Carolina with solar panels, or
  • Bought everyone in the world four iPads.[1]

Finally, the quality of the American health care system is not exceptional.  We do a reasonably good job of treating acute conditions and actually do quite well with prevention and in treating certain cancers.  But we don’t do as good a job with many chronic illnesses.  One of the few comparative surveys found the U.S. to be the worst among nineteen nations in terms of deaths preventable by medical care.

Our current health care system is neither economically sustainable nor morally defensible.  It must change, and it is changing.  How is it changing? What are the challenges that change presents?

How the Affordable Care Act is Changing Health Care

In 2010, Congress adopted the Affordable Care Act.  This law set us on a path toward wide-ranging, if not quite comprehensive, reform.  The primary focus of the ACA is obviously expanding access to health care financing—public and private.

The law attempts to do this by building on our current system.  It is fundamentally a conservative piece of legislation.  First, the law requires large employers—defined as those that employ 50 or more full-time or full-time equivalent employees, to provide their full-time employees and their children with health insurance coverage or pay a tax.  Currently 98% of employers with 200 or more employees and 94% of employers with 50 to 200 employees offer health insurance, so this is not a radical change.  But if large employers do not offer affordable and adequate coverage and one or more of their employees end up in the exchange, receiving premium tax credits, the employer will owe a penalty.

The nongroup or individual market will also change significantly under health care reform.  Currently nongroup coverage in most states is health status underwritten.  If you are young and healthy it is quite affordable; if you are older and unhealthy it is less affordable and may not be available.  Health status underwriting and preexisting conditions clauses will be banned in all markets as of 2014.  In the individual and small group market, the only rating factors that will be allowed are age, with a 1-3 variance, tobacco use, geography, and family composition.  The law also does not allow underwriting based on gender or occupation.  In general, rates will go up for young men; down for older people and women all other things being equal.

Coverage will be standardized as to benefits and also as to cost sharing.  All plans in the individual and small group market must cover the essential health benefits, defined in most states by one of the most popular small group plans.  All must be arrayed into four levels of cost sharing.  Catastrophic coverage will also be available for some.  Also cost-sharing reduction payments will limit the financial exposure of lower income enrollees, particularly those under 200% of the poverty level.

It is unclear still what the risk mix will look like in the nongroup and small group market.  The individual mandate is intended to encourage healthy people to purchase insurance, but it is quite weak, and if insurers price their policies expecting only unhealthy people to buy it, they may drive healthy people out of the market.  Also there are two temporary and one permanent premium stabilization programs that should reduce the benefits to insurers of cherry picking.

The private insurance market reforms were supposed to be accompanied with Medicaid expansions covering all adults up to 138 percent of the poverty level.  The Medicaid expansion was, of course, invalidated by the Supreme Court and it looks like now that only half the states will expand Medicaid initially.  When Medicaid was initially implemented, it took several years for all of the states to sign up, and I expect that is what will happen this time as well. The federal government will fund 100 percent of the expansion for the first 3 years, phasing down to 90 percent over 6 years, but most studies have found that the states will come out ahead financially from the expansion.  In states that resist the expansion, we will see the unfortunate situation of individuals with incomes above 100 percent of poverty receiving generous help but people with incomes below 100 percent getting nothing.  They will have to be picked up, as now, by emergency rooms, free clinics, and federally qualified health centers.

How does law address other two foundations of system—doctor, hospital and disease centered care and fee for service payments?

Private insurance reforms are at heart of the ACA.  Title I is the longest title of the legislation, but only one title in 10.  Medicaid is a second title, and does not cover only the expansion of adult eligibility, but also the expansion of community care options, improvement of coordination of care for dual eligibles, and other changes.  But the ACA contains eight other titles, dealing with quality, prevention, public health, workforce reform, transparency and program integrity, generic biologics, and many other topics.

Changes in the doctor, hospital, and acute disease centered system were already occurring before the ACA and would have continued without it.  Doctors have been moving from sole practice to group practice for some time and from small groups to larger groups.  Doctors have also increasingly been employed by hospitals and other providers and payers.   We have also seen an increasing reliance on nurse practitioners, physicians’ assistants, and even pharmacists to deliver preventive and primary care.  The scope of practice of these practitioners is expanding; physician supervision is diminishing.

The ACA poses few direct challenges to our doctor- and hospital-centered system.  It prohibits insurers from discriminating in allowing participation by providers acting within their scope of licensed practice.   It prohibits Medicare payment for new physician-owned hospitals after 2010 and limits expansion of existing facilities.  The emphasis of the ACA on patient-centered care medical homes will increase the use of non-physician health professionals in healthcare teams.

But the ACA will also have significant indirect effects.  The demand for primary care that will be driven by millions of new enrollees in health insurance and the reluctance of doctors to engage in primary care practice would seem almost inevitably to move primary care away from physicians to other professionals.  The competitive pressure that the ACA puts on insurance companies will drive them to narrower networks, reducing the bargaining power of “must have” imperial hospitals.  The publication of hospital cost information may empower patients to make purchasing choices based on quality and cost rather than simply being at the mercy of whatever hospital they happen to end up at.

The legislation also has a major emphasis on prevention.  The law expands wellness programs in the group market and includes, a demonstration project for wellness programs in the individual market, incentives for insurers to engage in prevention and wellness activities (such as nurse call programs), a mandate for coverage of preventive services without cost-sharing, expanded preventive services in Medicare and Medicaid, a community prevention fund that could be used for projects such as bike paths, and a requirement that chain restaurants and vending machines display the nutritional content of their products.

The ACA also focuses on care for chronic diseases.  The patient-centered medical home, accountable care organization, many of the proposals for the Medicare and Medicaid innovation center, a number of new programs to encourage community based rather than institutional long term care—all of these are in part efforts to address chronic diseases more effectively.  Most of these programs are implemented through changes in Medicare and Medicaid, but private health insurers seem to be following the lead of the public programs, and indeed innovating on their own.

The third foundation of our health care system has been fee-for-service, charge-based payment.  Here changes have been underway for some time.  We have always had prepaid medical plans and capitation became fairly common in the 1990s.  There have always been some physicians on salary, and salaried physicians have become more common as hospital employment has become more common.  Medicare payment for institutional services moved almost entirely into prospective payment starting with DRG-RBS in the 1980s, although prospective payment is still a means of paying per case rather than per patient.  There has also been a move toward pay for performance for at least a decade now, starting with demonstration projects and small add-ons but moving into the main stream.

The Medicare shared-savings, Accountable Care Organization program is a further move in this direction.  It is an attempt to get doctors and hospitals to work together to save money for patients, with the providers and professionals sharing some of the risk and the savings.  The Medicare and Medicaid Innovation Center is even more important, with a mandate and substantial authority to engage in experiments to improve approaches to provider payment. The Center has proposed about 40 demonstration projects for different projects for paying for health care.  There is a continued movement on both the public and private side toward paying for outcomes rather than procedures, although we have far to go to learn how to do this.

The Moral Challenges Change Presents

What moral challenges do these changes present? First, the change from a risk-based, market-based health insurance system represents a real challenge.  Our current system is based on a vision of actuarial fairness, and of the fairness and efficiency of markets.  Healthy people ought to pay less for insurance, because they cost less.  Wealthier people ought to have better access to coverage—they have earned it.

The ACA view of fairness is based on a vision of shared responsibility.  Fairness means everyone is included—insurance costs more for the healthy and the young, but is available and affordable to older and less healthy individuals and families.  Everyone is responsible for purchasing insurance if it is affordable, and large employers are responsible for covering their employees.  The wealthy will pay more in Medicare taxes, which now cover, for example, investment income for those earning a quarter of a million dollars a year and more, and for health insurance.  But insurance, and health care, will be more affordable to the poor.

All of this is coupled, of course, with expansion of wellness programs, higher premiums for smokers, and high cost sharing for most Americans, so this is not simply free care for all and subsidization of those who in fact refuse to be responsible for their health.  But the idea of community responsibility is at the core of the legislation, and it runs counter to American individualism. This is one of the main drivers of opposition to reform.

A closely related challenge is caring for those who have previously been closed out of the system and will now have access.  There will in particular be a demand for primary care that will be difficult to meet with our current resources.  I am often asked the question, what will happen to those of us who are already in the system if millions of new people enter it.  The basic answer is that we will have to share, an answer that should not be new or difficult for Christians.

But primary care practitioners face a huge challenge.  And in particular the challenge is going to be caring for Medicaid recipients in states that expand their programs. The ACA attempts to meet this challenge. Congress appropriated $11 billion to expand the community health center program.  It increases payment for primary care practitioners to 100% of Medicare with 100% federal funding, although only for two years.  The ACA also established a 10% bonus payment for primary care physicians in Medicare for the years 2011 to 2105. There are also a host of programs in the ACA for expanding the workforce, including reallocation of residencies, scholarships, faculty support, continuing education support, loan repayment, and other support programs with a focus on primary care, geriatric and pediatric care, nursing, dental care, minorities, and rural areas.

Bringing millions into the health care system will nonetheless stretch resources and require that they be used more appropriately.  This could mean less personal contact with patients with routine medical problems and more use of email and telephone.  Very likely, it will mean more use of retail clinics to handle routine problems.  It will require willingness on the part of doctors to yield control to some extent, to be part of a team.

It will also require willingness on the part of nurses, physician assistants, and others to take on more responsibility. It will also, most importantly, require willingness on the part of patients to understand that personal contact with a physician is not necessary to address every problem.  And, regulators and the courts need to adjust to the new realities of patient care.

Changes in payment will create incentives to do less rather than to do more.  This is a good thing if it eliminates wasteful and duplicative services.  It is not if it skimps on necessary care.  Much of the pressure to do less is likely to come from patients, who are facing ever higher cost sharing.  There will be a temptation for doctors and other health care providers to simply insist on payment up front for services.  It would be a terrible shame if higher cost sharing simply meant increased credit card debt, or even, in some cases, home equity loans to cover needed medical services.

One innovation that is likely to be helpful is the expansion of shared decision-making technology, where patients are given more information to make smarter decisions, and which often result in patients choosing less rather than more.

Finally, the financial implications of reforms to providers are going to be significant.  Health care costs are the reverse side of income and profits.  If you reduce costs, you also reduce income and profits.  We have reduced costs in the past few years. We have seen the slowest growth in half a century in health care costs in the past three years.  But much of the slowed growth has been because people have lost their jobs and insurance, and have been consuming less health care because they are uninsured or have high cost sharing.    A number of studies have shown that higher cost sharing results in unfilled prescriptions or splitting pills and less preventive care.

We are coming to the end of a time that spans much of the lifetime of most of us living today when the resources available for health care in the United States were essentially unlimited.  Practitioners and providers could charge whatever they wanted, insurers would pay and raise their premiums, and employers would pay whatever they were charged by the insurers.  But millions of Americans were left out, and their ranks grew every year as employers dropped insurance in the face of increased costs.

These times are coming to an end, in part, but not entirely because of the ACA.  The challenge is how to respond to a world in which more people have access to health care but we are not willing to spend more on it.  I think we as Mennonites know something about service to the least of these and of doing more with less.  I think we have an opportunity here to lead and teach, and hope we rise to the occasion.

About the author

Timothy Stoltzfus JostTimothy Stoltzfus Jost, J.D., Harrisonburg, Virginia, holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law.  He is a co-author of a casebook, Health Law, used widely throughout the United States in teaching health law and now in its sixth edition.  He has written numerous monographs on legal issues in health care reform for national organizations and blogs regularly for Health Affairs, where he is a contributing editor, on health reform implementation.  He is a consumer representative to the National Association of Insurance Commissioners, a member of the Institute of Medicine, and a member of the Community Mennonite Church in Harrisonburg.